When you trade on the forex market you have to accept that there will be times when you lose on a trade. There are many traders who do not accept this loss and they fall into revenge trading. This kind of trading is actually very dangerous because of the mentality behind it. It is important that you know what revenge trading is and why you should avoid it. When you understand this you will be able to healthy accept losses that you face on the forex market.
What is Revenge Forex Trading?
There are a lot of traders that do not know what revenge forex trading is. Revenge forex trading is when you try to get revenge on the market for a loss you have suffered. This is a very unhealthy way of dealing with a loss on the market. Traders who complete this kind of trading feel that the forex market has cheated them and they want revenge. One major problem with this thought pattern is that the market is not actually out to get you.
There are many reasons why a trader may lose money on a trade. If the trade was done correctly and there were no errors on the trader’s part then it could have been a sudden market change. There are times when the forex market moves unexpectedly. At these times the market is not out to get you and there is nothing you could have done to stop the loss.
Why Is This Trading Bad
The main reason why revenge trading is so bad is because you are making an emotional trade. Any trade that has a motive of getting back at someone is emotion in nature. This means that you are not thinking clearly when you open the position and you could be taking extra risks that you would not usually use. These risks generally manifest as excess leverage.
When traders complete revenge traders they are looking to make back all the money the market ‘stole’ from them. This means that they have to risk more to make up this amount. A typical revenge trade can risk around half a traders account because of the leverage they are using. This is something that most traders avoid normally, but as you are emotionally driven you may not think about it.
Another problem that comes about when you revenge trade is that you do not wait for the right time. When you are worked up you will open a trade on the current market conditions whether they suit you trading or not. This is bad because you have to wait for the right conditions in order to be profitable. Trading at the wrong time generally leads to greater losses.
How to Avoid this Trading
It is important that you avoid revenge trading at all costs. The best way to avoid this is to develop a healthy way of coping with your trading losses. Most traders will take some time away from the market to calm down after a loss. This ensures that they are not making emotional trades and they have time to analyse what their next step will be.